Today, Belden said in a filing with securities regulators that it paid $75.8 million plus the assumption of $18.4 million of debt for a company it acquired on February 8, 2018 (the same day it confirmed the SAM acquisition).

This equates to an enterprise value of $94.2 million.

Based on filings with the UK government, SAM’s parent company had revenue of £90.8 million ($123 million USD at 2016 average exchange rate) through December 31, 201, and increase of 20.3% from £75.4 million ($115.2 million USD at 2015 average exchange rate) for the 12 months ending December 31, 2015.

Based on its previous acquisitions in the broadcast industry, Belden typically pays around 8x EBITDA when it buys a company. If that was the case in the SAM transaction, it would mean that SAM’s EBITDA over the trailing twelve months prior to the acquisition was $11.775 million. However, in its filing with UK regulators, SAM said it had EBITDA of -£1.6 million for the 12 months ending on December 31, 2016. Performance for the full year 2017 is unknown.

Given SAM’s growth from 2015 to 2016, the company may have achieved positive EBITDA, but the full details won’t be known until Belden provides additional information about the transaction (which it said it will do closer to the 2018 NAB Show). It’s also possible that the valuation was based on a multiple of SAM’s sales in 2017.

Attend the 2018 Devoncroft Executive Summit to hear more about Belden’s strategy

For those wondering about Belden’s plans for SAM, and whether it continues to look for M&A targets in the broadcast industry, join us on April 8, 2018 to find out.

On February 8, 2018, we acquired a company for a purchase price of $75.8 million, plus we assumed debt of $18.4 million. The acquisition includes a potential earn-out for which we have not yet estimated a fair value. This acquisition was funded with cash on hand.

We are in the preliminary phase of the purchase accounting process, including obtaining third party valuations of certain tangible and intangible assets acquired. As such, the purchase accounting process is incomplete and we cannot provide the required disclosures of the estimated fair value of the assets and liabilities acquired for this business combination.

Belden announced it has closed the acquisition of Snell Advanced Media (S-A-M).

Terms of the deal were not disclosed.

The deal makes Grass Valley one of the largest media technology suppliers.

Clearly the company believes there is growth to be had in broadcast. At the company’s December 2017 investor day, Belden CEO John Stroup said “I think that we have a lot more conviction around what’s happening in the broadcast industry than we did two years ago. And as you recall – or you may recall, our concentration within production, in particular around live, gives us a lot more confidence that we’re going to see growth in that end market than we did, say, in the last two to three years.”

Although at first glance there is substantial product overlap between Grass Valley and S-A-M, there are less similarities between each company’s geographic sales footprint, which will help Grass Valley expand into new customers. A Grass Valley spokesperson said that the deal would help the company extend its reach and provide in-region support to its global customer base.

Additionally, a number of each company’s respective product lines are complementary (in news for example), making the overall Grass Valley proposition more robust.

According to Belden management, S-A-M will be integrated into Grass Valley, and moving forward the S-A-M brand name will be retired, and “Grass Valley, a Belden Brand” will be used as the company name.

Tim Shoulders will be the president of the combined company, which will be headquartered in Montreal.

“With this investment Belden again demonstrates our commitment to the broadcast industry. Adding SAM’s employees and products to the Grass Valley family extends Grass Valley’s global reach, makes us more agile and provides even more domain expertise to enhance Grass Valley’s industry-leading solutions in networking, news and live production and content delivery for broadcasters,” said Shoulders. Our customers face competition and uncertainty like never before. This transaction will help them navigate the technology options available to them with fewer concerns around interoperability and deployment complexity while providing them greater access to the innovators developing the solutions of tomorrow.”

Prior to doing this deal, Belden did substantial work to refinance its debt, which provided additional financial leverage for M&A. Indeed, the company’s CFO often refers to the amount of “dry powder” that the company has available for M&A. At the company’s investor day, Stroup said “We [are] extremely pleased with the execution of our debt refinancing and repayment during the quarter. By issuing €450 million of senior subordinated notes at 3.375% and €300 million at 2.875%, the lowest long-term borrowing rates in the history of the company, we have further lowered our cost of capital and extended our maturities. In total, we expect these actions to be accretive to EPS by $0.47 on a full-year basis.

Reminiscent of Previous Industry Roll-ups

The S-A-M deal is Belden’s fifth acquisition in the media and broadcast technology sector.

In December 2009, Belden acquired Telecast Fiber Systems Inc for $20.1 million in cash

In addition to these transactions, Belden acquired KVM switch vendor Thinklogical in May 2017 for $171.3 million in cash, and added it to the company’s Broadcast Solutions segment for reporting purposes.

Including Thinklogical, Belden has invested $779.4 million in the broadcast industry since 2009. When the company discloses the price paid for S-A-M, the thoal amouint will be known.

This level of investment is reminiscent of previous industry “roll-ups.”

Speaking at the 2017 Devoncroft Media Technology Business Summit, Belden CEO John Stroup said “Of all the industries we’re in, [media and broadcast] is the industry where the economic capabilities of the vendors are the least developed, and that creates a lot of stress for us.

“We would obviously prefer that all vendors were making good economic investments, because [today] we’re all investing in everything, and that doesn’t lead to particularly good economic returns. I think we’re all searching for a level of scale, because I think this is a business that requires a lot of scale from a commercial point-of-view. To operate globally, you need to generate the amount of revenue that gives you the scale from an R&D point of view. So, what we’ve been trying to do with our team is teach them different ways to evaluate how much to be spending, where to be spending, and trying to put some rigor and framework around it so we’re not doing anything that’s reckless. Some vendors have gotten themselves into problems…. We’re trying to really careful of where we place our bets.”

With the S-A-M deal, Belden achieves greater scale.

Additionally, the company has previously telegraphed its plan to build a factory in India, in order to lower its cost of production (it is unknown at this time whether the production of Grass Valley or S-A-M products will move to this factory once it opens).

Greater Control of the IP Transition?

Belden executives often speak about how industry-wide transition to IP-based infrastructure provides potential growth opportunities for Grass Valley. During Belden’s Q4 2017 earnings call, Stroup said Q4 2017 was Grass Valley’s strongest-ever quarter for sales of IP-based systems, and predicted that IP shipments would accelerate in the future, thanks to the adoption of new standards and increasing custom confidence in IP-based solutions. “We think [the finalization of the SMPTE 2110 standard is] an important development and certainly going to be helpful moving into 2018. We had our strongest quarter ever in IT-based product revenues in the fourth quarter. It was over $5 million. And it was to 36 different customers. So, it’s clear that our customers are getting more confident, more comfortable with the technology. I think they view us as really one of the only solutions that meets the open standard. As we’ve talked about, we have some competitors that have done very well, but their systems and their solutions are far more closed than what we’re offering and what the standard dictates. So, I think that the Grass Valley business, from a product point of view, is very well positioned moving into 2018.”

Indeed, as one of the three founders of AIMS, Grass Valley is a key player in the industry-wide transition to IP-based operations. The acquisition of S-A-M puts Grass Valley in control of more potential IP-related infrastructure refresh projects.

Because the broadcast industry is dwarfed by the broader IT market, the IT “titans” (such as Arista, Cisco, Huawei, and Juniper) tend to use established broadcast suppliers as a route to market. By acquiring S-A-M, Belden now owns two of the top “traditional broadcast vendors,” making it more likely that they will successfully capture market share as the industry transitions to IP-based operations.

The Belden M&A Strategy

It shouldn’t be a surprise that Belden made this acquisition, over the past decade, the company has grown substantially through strategic M&A.

As recently as December 2017, Indeed, Belden routinely touts it well-established approach of acquiring underperforming assets, and generating synergies and cost savings through what it calls “The Belden Business System.”

During its December 2017 analyst day, Stroup told analysts “we continue to actively pursue a number of attractive inorganic opportunities. We currently have $475 million available for inorganic opportunities. We estimate that approximately $1.7 billion will be available through 2020. This will come from organic activities and it would be at or below net leverage of 3 times.

“Over the last three years, approximately 75% of capital deployment has been allocated towards M&A. Going forward, we expect to allocate approximately 55% towards M&A.

“Our acquisition approach always begins with our strategic plan. Nothing enters our funnel of opportunities, nothing begins cultivation until we identify an opportunity as either allowing us to take advantage of an opportunity or to address a threat.

“The companies that we pursue are typically company leaders within their specific area, often niches. They have products that are complementary to ours and typically there are opportunities for significant costs or commercial synergies.

“Typical bolt-on for Belden would be a company with revenue growth that is similar to Belden’s end markets. Gross profit margins are typically greater than Belden. However, EBITDA margins are typically lower than the Belden average.

And by applying our Lean enterprise system, we have the opportunity to achieve EBITDA margins at or above Belden average, achieve ROIC of 13% to 15% by year three and purchase the company for a post-synergy multiple of approximately seven times EBITDA.”

Telestream announced that it has acquired Vidcheck, a provider of automated quality control (QC) solutions for broadcast and media technology applications.

The deal, which was funded by cash from operations, has been completed. Terms were not disclosed.

Vidcheck founder Tom Dove will remain with the enlarged company.

The Vidcheck deal is Telestream’s sixth acquisition. Similar to its recent purchases of cloud encoding company Panda, and captioning specialist CPC, Telestream CEO Dan Castles described the Vidcheck deal as a “tuck-in,” rather than a transformation. Although Telestream’s Vantage workflow orchestration platform currently includes an option called Analysis, the company believes that it can drive greater value for its customers by offering Vidcheck’s automated file-based QC software as part of its overall offering.

“Vidcheck’s team and product portfolio line up very well with our area of expertise,” said Castles. “It is not just some great technology and products that we are acquiring but also a gifted, talented and passionate team that will reinforce our resources here at Telestream. We look forward to leveraging our combined know-how to offer our worldwide customer base an even more complete and exciting product portfolio.”

Telestream says it will also continue to integrate and interoperate with multiple QC vendors, as it already does today.

Google is acquiring Anvato, a provider of video processing functionality for multi-platform content delivery. The acquisition was announced on the Google Cloud Platform blog by Belwadi Srikanth, Senior Product Manager. Terms of the acquisition were not disclosed.

According to SEC filings, Anvato had raised $2.8 million in late 2008. The Mountain View based company has several high-profile media clients including NBC Universal, Fox Sports, Univision, and Gray TV.

In the blog post announcing the acquisition, Mr. Srikanth cites the opportunity to participate in the media industry’s transition to over-the-top distribution models and the ongoing adoption of cloud solutions by media organizations. “With OTT adoption rapidly accelerating, the Cloud Platform and Anvato teams will complement our efforts to enable scalable media processing and workflows in the cloud” writes Mr. Srikanth.

The Media Solutions portion of the Google Cloud Platform website highlights case studies with UK visual effects studio Framestore, US visual effects studio Atomic Fiction, and live video service provider iStreamPlanet (now owned by Turner). There is overlap in the technology offerings of iStreamPlanet and Anvato, though any move by a cloud provider to offer higher level functionality will necessarily lead to overlap with existing customers.

Since its August 2014 acquisition of ZYNC Render, the Google Cloud Platform has been active in the post-production vertical. At the 2016 NAB Show, Autodesk and Google announced integration between ZYNC and Autodesk’s Maya, a software video effects tool for animation, modeling, and rendering. Maya users can offload rendering tasks, as needed, to the Google ZYNC Rendering service running on the Google Cloud Platform. ZYNC pricing is consumption based and begins at $0.60 per machine hour.

Interestingly, prior to its acquisition by Google, ZYNC had been optimized to run on Amazon Web Services.

Anvato’s CEO Alper Turgut posted a message about the acquisition on the Company’s blog. “We are thrilled to bring together Anvato with the scale and power of Google Cloud Platform to provide the industry’s best offering for OTT and mobile video. This will allow us to supercharge our capabilities, accelerate the pace of innovation, and deliver tomorrow’s video solutions faster, enabling media companies to better serve their customers” said Mr. Turgut.

Satellite service provider SES today announced the completion of its acquisition of RR Media (NASDAQ: RRM), a provider of media services to the broadcast and media industries. The acquisition was announced in late February 2016, but had been pending closing conditions and regulatory approvals. RR Media’s shares ceased trading on the NASDAQ today.

As indicated in the original announcement, SES is merging the operations of RR Media with its Platform Services group to create a larger global media solution provider. The new combined group will operate under the trade name MX1. Avi Cohen, the previous CEO of RR Media, will serve as the CEO of MX1.

The press release announcing the new trade name highlights the origin of MX1 from the below statement.

“Bringing it all together for the first time, MX1 aims to be the new number 1 in Media eXperience.”

SES’s new MX1 subsidiary will have 16 offices worldwide and six media centers. MX1 is now responsible for distributing more than 1,000 TV channels, managing 440 channels of playout, and delivering content to over 120 subscription VOD platforms.

MX1 and SES’s HD Plus subsidiary will constitute the SES Media Solutions group led by Wilfried Urner. HD Plus is a HD satellite TV offering in Germany.

Mr. Urner commented on the acquisition as follows, “We are confident that the new MX1 will leverage the expertise and success they have garnered in their respective key markets to expand their product portfolio. The addition of MX1 to the SES group is a first step in globalising SES’s video services business and in accelerating the completion of our goal to become one of the leading next generation media service providers”

Avi Cohen, CEO of MX1, added, “This is an exciting day for us as we introduce a new company to the industry and our new brand name and logo…This merger allows us to scale-up on a global basis and become the world’s leading media services provider, delivering next-generation digital video and media solutions to our worldwide customers.”

Bloomberg is reporting Disney has agreed to acquire a 33% equity stake in BAM Tech, the recent spin-out of MLB Advanced Media (“MLBAM”), the streaming technology division of Major League Baseball (“MLB”). Forbes is separately reporting the deal is tracking toward completion later this summer.

Disney is reported to be purchasing the 33% equity stake in BAM Tech for $1.16 billion, implying a valuation of $3.5 billion.

As part of the investment, Disney also gains the right to purchase an additional 33% of BAM Tech during the next four years. Should Disney exercise the option, it would become the majority owner of BAM Tech. The NHL currently holds a 7% – 10% equity position in BAM Tech based on the August 2015 partnership deal between the companies.

MLBAM is jointly owned by all 30 MLB franchises, with each holding a 1/30 ownership interest. BAM Tech comprises the technology service business of MLBAM serving third-parties (i.e. not MLB). The August 2015 spin-out of BAM Tech was intended to enable MLBAM to accelerate commercial initiatives with third parties unaffiliated with MLB.

At the 2016 Re/code summit, Bob Bowman, the CEO of MLBAM, said he expects revenue of $1.2 billion to $1.3 billion during 2016 (a substantial increase over 2015 revenue of $800 million). Mr. Bowman also stated a revenue split of 80 / 20 between baseball and third party revenues. Those figures suggest BAM Tech was an approximately $160 million revenue business in 2015 and is set to grow to $240 – $260 million (50+% year-over-year).

Using those revenue estimates for BAM Tech, the Disney investment values the business at an approximate revenue multiple of 14x forward-looking sales (Note: several estimates were used to arrive at that valuation figure). It is unknown whether part of this consideration accounts for the value of the option Disney received, which would allow Disney to gain majority control. All things being equal, purchasing control should come at a premium.